The company's shareholders' net profit increased 21.3% year-on-year to 195.9 million yuan in 2021. In 2021, the company's revenue increased 11.8% year-on-year to 656.9 million yuan. The company's interest income reached RMB 541.4 million, an increase of 12.6% over the previous year, and the company's consulting fee revenue reached RMB 115.6 million, an increase of 8.4% over the previous year. Net interest spreads increased 0.2 percentage points year over year to 3.8%. Costs and revenues fell 1.0 percentage point year over year to 63.9%. Stable asset quality. By the end of 2021, the company's non-performing asset ratio reached 1.5%, the same as at the end of 2020. The company's non-performing asset reserve coverage rate increased 12.7 percentage points from the end of 2020 to 175.9%.

Lease and investment linkage continues to deepen. In 2021, the Beijing Zhongnuo Tongchuang Fund launched 7 projects, with a delivery amount of 95 million yuan, an increase of about 50% over the previous year. Completed the first project and exited, contributing nearly RMB 0.2 billion in profits to the company.

We expect the company's earnings to continue to record relatively good growth in 2022 and that the quality of the company's assets will improve.

We forecast that the company's net profit per share in the 2022-2024 fiscal year will increase by 22.6%, 23.3%, and 23.8%, respectively, to RMB 0.180, RMB 0.222, and RMB 0.275. Considering the current market valuation, we lowered the company's target price to HK$1.08, corresponding to 4.9 times the price-earnings ratio for FY2022 and 3.9 times the price-earnings ratio for FY2023, 0.6 times the net market rate for FY2022, and 0.5 times the net price-earnings ratio for FY2023. At the same time, we maintain the company's “buy” investment rating.

The net profit of shareholders of Zhongguancun Technology Leasing (the “Company”) increased 21.3% year-on-year to 195.9 million yuan in 2021, in line with market consensus expectations and our expectations. The company's revenue in 2021 increased 11.8% year-on-year to 656.9 million yuan. The company's interest income reached 541.4 million yuan, an increase of 12.6% over the previous year, mainly due to the improvement in net interest spreads and the expansion of interest-bearing assets. Net interest spreads improved 0.2 percentage points year over year to 3.8%. The company's consulting fee revenue reached RMB 115.6 million, an increase of 8.4% over the previous year, mainly due to good growth in management and business consulting fee revenue. As the company recorded a relatively good increase in revenue, the cost to revenue ratio fell 1.0 percentage point over the previous year to 63.9%. Stable asset quality. By the end of 2021, the company's non-performing asset ratio reached 1.5%, the same as at the end of 2020. The company's non-performing asset reserve coverage rate increased 12.7 percentage points from the end of 2020 to 175.9%.

The company's financial leasing business continues to grow, and product innovation has been implemented. The company's financial leasing business continues to grow. Leasing investment was approximately RMB 6.17 billion, an increase of about 17.1% over the previous year; 147 new customers were added. Product innovation was implemented. The company officially launched intellectual property financing products in September 2021. On the basis of policy support, expert consultation, and peer research, the company developed two new products, the sale and leaseback of intellectual property rights and the second licensing of intellectual property rights, to solve the difficulties of science and innovation enterprises finding it difficult to finance intangible assets. Since the product was launched, 29 projects have been launched in 2021, with an investment amount of 220 million yuan, accounting for 41% of the number of specialized special new projects.

Lease and investment linkage continues to deepen. In 2021, the Beijing Zhongnuo Tongchuang Fund launched 7 projects, with a delivery amount of 95 million yuan, an increase of about 50% over the previous year. The projects invested are all leased customers. Completed the first project and exited, contributing nearly RMB 0.2 billion in profits to the company. The company is setting up the second phase of the Zhongguancun Special Innovation Fund, with an estimated size of 500 million yuan. The company's equity pool continues to grow, and it continues to reserve development potential.

We expect Sci-Tech Innovation leasing to continue growing at a relatively rapid pace in 2022. In 2022, the global economy is expected to continue its recovery path. The COVID-19 vaccine and specific drugs have made positive progress, but they are still threatened by the mutated strain of COVID-19; we expect the local epidemic in China to remain well controlled, and the Chinese economy will continue to recover; we expect the monetary policy of the People's Bank of China to be steady and flexible and moderate, and China's liquidity environment will be relatively stable. Technology-based SMEs have become an important engine of the Chinese economy. We expect the relevant government support policies to continue, and technology-based SMEs will continue to maintain a good development trend. With the introduction and publication of the “Regulations on Local Financial Supervision and Administration” (draft for comments) by the People's Bank of China, we believe that the intensive introduction period of financial policies of recent years will come to an end. Relevant policies will guide the financial leasing industry to “return to its roots”, achieve specialized and specialized development, further standardize the industry order, and benefit leading financial leasing enterprises in segmented fields. Overall, we expect China's technology and new economy industries to continue to grow well, and we expect the financial leasing industry to continue to develop steadily. Therefore, we expect science and innovation leasing to continue to grow at a relatively rapid pace in 2022.

Raise our net profit forecast for the 2022/2023 fiscal year. In 2022, as we anticipate that technology leasing will grow at a relatively rapid pace, we expect the company's business to grow at a relatively rapid pace and continue to record relatively good earnings growth. In 2022, as we expect the COVID-19 pandemic in mainland China to remain well controlled, the Chinese economy will continue to recover, China's liquidity environment will be relatively stable, financing support for small and micro enterprises and private enterprises will continue, and we expect the company's asset quality to improve. Overall, we raised the company's net shareholder profit forecast for the 2022/2023 fiscal year by 4.1%/9.4%, respectively. We forecast that the company's net profit per share in the 2022-2024 fiscal year will increase by 22.6%, 23.3%, and 23.8%, respectively, to RMB 0.180, RMB 0.222, and RMB 0.275.

We lowered the company's target price to HK$1.08 but maintained the company's “buy” investment rating. The company expects to continue to benefit from the following factors: 1) we expect science and innovation leasing to grow at a relatively rapid pace in 2022; 2) the advantages of controlling shareholders; 3) the expansion of planned regional coverage from the Beijing-Tianjin-Hebei integrated region to other regions such as the Guangdong-Hong Kong-Macao Greater Bay Area and the Yangtze River Delta; 4) implementation of product innovation; and 5) continued deepening of lease-investment linkage. We expect the company's earnings to continue to record relatively good growth and improve the quality of the company's assets in 2022, which is expected to underpin its valuation. However, considering the current market valuation, we lowered the company's target price from HK$1.35 to HK$1.08, corresponding to 4.9 times the price-earnings ratio for FY2022 and 3.9 times the price-earnings ratio for FY2023, 0.6 times the FY2022 net price-earnings ratio, and 0.5 times the FY2023 net price-earnings ratio. At the same time, we maintain the company's “buy” investment rating.

Risk Factors:

The negative impact of the COVID-19 pandemic may have exceeded our expectations.

The economic climate is not in line with our expectations.

Fluctuations in market interest rates.

Expectations that the US will withdraw from quantitative easing and interest rate hikes.

The negative impact of the Russian-Ukrainian conflict.

The tension between China and the US is likely to intensify.

The negative impact of global trade frictions and geopolitical conflicts may exceed our expectations.

Changes and developments in the regulatory environment for the technology and new economy industries and the financial leasing industry.

The customer's ability to pay rent on a regular basis.